Current Mortgage Refinance Rates

National Average Mortgage Rates

U.S. News Expert Insights

"Although mortgage rates continued to retreat this week, the latest home sales data from the National Association of Realtors shows that the spring housing market is still struggling to thaw. Many homebuyers are choosing to wait on the sidelines until conditions improve – either in the form of improved inventory of homes for sale or lower mortgage rates.

"Those who are holding out for better rates before buying a home could be left waiting for quite a while. Mortgage rates are around 7% for the 30-year fixed term, and they might not fall much lower than that until the end of 2024, when the Federal Reserve begins cutting the benchmark rate.

"The good news is that inflation and the labor market showed signs of cooling in April, which can give Fed officials the confidence they need to eventually cut rates later this year. Most forecasters believe that the central bank will start rate cuts in September, but policymakers have made it clear that they're in no rush and that they're prepared to keep rates higher for longer if necessary."

– Erika Giovanetti, U.S. News Loans Expert

How Does Refinancing a Mortgage Work?

Refinancing your mortgage is "essentially trading in your old home loan for a new one," says Chuck Meier, senior vice president and mortgage sales director at Sunrise Banks.

Your lender uses the new mortgage to pay off your old home loan. You'll then start making payments on the new mortgage with updated loan terms that often include a different principal and interest rate. Homeowners usually refinance to save money, to change loan terms or to borrow money against their home equity.

Mortgage refinancing takes 30 to 45 days on average. You'll review your refinance options, apply for the loan and provide documents, wait for underwriting and appraisal, and close on the new loan.

How Much Does Refinancing a Mortgage Cost?

Lenders charge fees to refinance just as they would for a purchase mortgage. Homeowners pay $5,000 on average to refinance, according to Freddie Mac, but your loan size and location will also influence the cost.

The best way to estimate your refinance costs is to get a quote from a reputable bank or credit union. Ask for an estimate of your new interest rate and monthly payment as well as a complete list of refinancing fees. Once you have these numbers, you will be able to calculate your break-even point, which is when your savings equal costs.

"Divide the total refinance closing costs by your estimated monthly savings," says Thomas Bullins, a mortgage sales manager at AmeriSave Mortgage. "The result is the number of months you'd need to stay in your home to recoup your costs."

Let's say your refinancing fees total $5,000, and you will save $100 a month with the new loan. Divide $5,000 by $100, and you get 50. That means you will need 50 months – a little more than four years – to recoup the cost of refinancing.

Some lenders may advertise no-cost refinance loans or no-closing-cost loans. Your lender will cover the closing fees on your loan but will recoup its costs in some way. For instance, a lender may charge you a higher interest rate to cover the cost of making the loan or bake the closing costs into your loan amount. With either method, you won't pay closing costs but will have a higher monthly payment than if you did.

When Should You Refinance Your Mortgage?

If you're considering a refinance, you will need to determine whether it makes sense for your situation. That involves looking at your financial goals, considering how long you plan to stay in your home and checking current mortgage rates. Here are some situations when refinancing might be a good idea.

You qualify for a lower interest rate. You may get a good refinance rate if market rates are dropping or your credit score improved since you took out the original loan. Some mortgage experts say a rate-and-term refinance makes financial sense if you can lower your rate by about three-quarters of a percentage point. But even shaving half of a point off your rate may be a good move if it helps you lower your monthly payments and you plan to stay in the home for the long term.

However, you may wind up paying more interest over the life of the loan if you lengthen the term in the refinance. Use a mortgage calculator to determine if you'll come out ahead.

Your home equity has increased substantially. Homeowners with a mortgage in early 2022 saw their equity increase by 32.2% compared with the previous year, according to a home equity report from CoreLogic, a data and analytics company. That works out to an average gain of $64,000 per borrower.

If you're sitting on a lot of equity and want to borrow against it, you may decide to do a cash-out refinance. This involves taking out a new mortgage for more than you owe, paying off the old loan and keeping the difference in cash.

Lenders usually require you to have a certain amount of equity for a cash-out refinance – and "with rising home values, you may have enough," Bullins says. The money you borrow may be used for anything, such as financing home improvements, paying off debts or funding large purchases. 

You're removing a co-borrower from the loan. If you took out the mortgage with a co-borrower, such as a spouse, relative or friend, both of you are equally responsible for making mortgage payments per your loan contract. When you want to remove a borrower, you may need to pay off the loan. Refinancing puts the mortgage in your name and pays off the old debt with the new loan.

You want the benefits of a conventional loan. Government-backed loans, including FHA loans and USDA loans, typically come with perks such as low down payments and flexible lending requirements. But they can have expensive downsides. For example, borrowers may need to pay mortgage insurance throughout the life of the loan.

If you qualify to refinance to a conventional loan, you will be able to remove mortgage insurance once your loan-to-value ratio reaches 80%. Refinancing to a conventional loan with more favorable terms – and eventually dropping mortgage insurance – may help you save money.

You want to combine a first and second mortgage. Some homeowners take out a second mortgage in the form of a home equity loan or line of credit, also called a HELOC. But if having multiple payments is confusing, your interest rates are high or one loan has an adjustable rate, you may consider combining the loans using a rate-and-term refinance. This can help you simplify your finances and potentially save money.

You want a fixed rate. Some home loans have an adjustable rate, where the interest rate is fixed for a certain period of time and then may change regularly. For instance, a 5/1 adjustable-rate mortgage has a fixed interest rate for five years and then may change once a year for the rest of the loan term.

If you plan on living in your home for just a few years and want the lowest rate initially, an adjustable-rate mortgage could be a good choice. Otherwise, "Switching to a fixed-rate loan with reliable and stable monthly payments can give homeowners the security of knowing that their (principal and interest) payment will never change," Bullins says. Keep in mind that your total monthly payment can still rise if your escrow costs increase – such as property taxes and homeowners insurance.

How to Find the Lowest Mortgage Refinance Rate

You can find the lowest refinance rate on the market by following a few steps.

Compare mortgage refinance rates. Getting quotes from multiple lenders is the best way to find the lowest mortgage refinance rate. Rates can vary by lender, borrower and location, and even a small difference can add up over time.

For instance, a refinance rate of 5% can save you $52.58 a month compared with a rate of 5.5% on a loan balance of $200,000 with a 15-year term. Over the life of the loan, you save about $9,465.

Buy points to lower your rate. Discount points are fees you can choose to pay your lender in exchange for a lower interest rate. This is sometimes known as buying down the rate.

One point typically costs 1% of the loan amount, meaning one point on a $200,000 mortgage would cost $2,000. Each point reduces your rate by about a quarter of a percentage point, which can lower your monthly payments. You'll need to calculate your break-even point to see if buying points makes sense for your situation.

Improve your credit. Having good credit, which generally means your credit score is 670 or higher, may help you get a lower refinance rate. You may be able to raise your credit score by taking a few simple steps.

Visit AnnualCreditReport.com to request your free credit reports from the three credit bureaus. Look for errors that can bring down your scores, and dispute any errors you find. Paying down your debts and consistently paying your bills on time may also help boost your credit scores.

Is It Worth It to Refinance?

Mortgage refinancing may be worthwhile if you can lower your interest rate, pay off the loan faster, reduce your monthly payments or achieve another financial goal. But whether refinancing is the right move for you will depend on a number of factors relevant to your unique situation, such as your current mortgage interest rate and repayment terms.

Generally, you'll want to avoid refinancing if it will cost you more money than it saves in the long run. Before refinancing, speak with your current mortgage lender to see if you'll be charged a prepayment penalty for paying off your mortgage early. For most homeowners, their mortgage is their largest debt burden, so consider how refinancing would impact your loan before you apply.

If you're still on the fence about refinancing your mortgage, speak with a financial advisor who can review your financial situation and help you make an informed decision with your home loan.

Refinancing FAQs